Arrest, Resignation Foreshadow Stuggle for Chinese Succession

By Rone TempestLos Angeles TimesBEIJING

The resignation of a senior state industrial chief and the arrest of his
son - both with close connections to senior Chinese leader Deng Xiaoping's
family - have prompted speculation here and in Hong Kong financial markets
that the 90-year-old Deng's power is waning and a succession struggle is
under way.

The resignation of longtime Deng ally Zhou Guanwu, 77, chairman of the
giant Shougang Group (Capital Iron and Steel Corp.), and the arrest on
corruption charges last week of his son Zhou Beifang, 42, chairman of a
Hong Kong-based Shougang subsidiary, represent the highest profile case yet
to surface since a government anti-corruption drive began in 1993.

But because of the close connections to Deng family business interests -
including a Hong Kong company tied to Deng's youngest son - some contend it
might also be the first shot in the succession battle that is expected to
follow Deng's death.

"The fact that Deng could no longer protect these people is a clear sign
that his power is diminishing," commented a European diplomat in
Beijing.

In the past, military connections have played the biggest role in
determining who would rule China. Deng was helped into power in 1978 with
support from the senior leadership of the People's Liberation Army.

The Shougang case illustrates that in today's China, economic interests
and power bases may also be a factor in the succession struggle to come.
Deng was the first Chinese leader in the Communist era to build an
extensive financial, as well as a political base, for his family.

These latest moves also support the theory that, in the post-Deng
period, the businesses of "princelings" - sons and daughters of Deng and
other senior leaders - will become fair game under the new order.

The Shougang corruption case has not been mentioned in the official
mainland Chinese language press. But it has sparked considerable interest
in Taiwan and Hong Kong, where the reports prompted sharp drops in share
prices affiliated with Shougang and other mainland companies.